The Dangers of a Database View of the Customer

I am meeting more and more companies who are enthralled by the sheer volume of data they have collected on their customers. When I talk to them about customer insight, they explain that they already have great customer insight because they know so much about them – what they’ve bought, when and where, how much they paid for it, where else they shop, what kind of neighborhood they live in, etc. etc.

But, there are serious shortcomings of the database view. We know a lot about customers, but we don’t really know them. The most important thing we don’t know is why? Why did she buy that lumber? Why are they going to Yosemite on vacation this year? Why did he send those dozen white roses? That’s what I mean by insight – knowing the context in which the customer is buying, what he or she is trying to get done. We’ll never extract this from the data that reside in customer databases.

The other serious issue I have with a primarily database-driven view of the customer is that the data are used in a very blunt-instrument way. The logical extension of the database-driven view in many firms is to use the data to segment or categorize customers so that we can then target them with the right campaign. As a result, we find customers categorized into A, B, C and D, or Platinum, Gold, Silver and Bronze groupings. These categories are meant to indicate the value of the customer to the firm. But, this is a very blunt-instrument way to calculate customer value, based as it typically is on spend, frequency of buying, and total volume bought, and neglecting the important but softer measures of customer value such as likelihood to refer and sphere of influence.

It’s also not a very customer-centric view, labeling customers in terms of their value TO US, rather than in terms of how we can create value FOR THEM, which is what I thought this great move to customer-centricity was all about. The dangers of mislabeling customers through a strict application of the database view of customer value are legion. Plus, customers don’t like it. I’ve never met a “D” customer who considered himself a “D” customer.